Citibank forecasts positive outlook for Asian economy in 2023

The Thai economy is expected to grow further in 2023 as a result of the tourism recovery, an increase in private sector spending, as well as easing inflation. In any case, there remain downside risks to monitor amid global slowdowns.

Johanna Chua, Chief Economist for Asia Pacific, Citigroup said, "The Asia-Pacific region's overall economy shows positive signs in 2023. Citi expects Pan-Asia GDP growth at 4.4%, a slight increase from 3.5% in 2022. Despite risk factors such as the war between Russia and Ukraine, the geopolitical tension between China and the United States, and price shocks, the regional economy is expected to continue to grow, following the end of the monetary tightening cycle. The Fed's policy rate is expected to peak, and the US dollar's depreciation in the second half of 2023 is expected to relieve some pressure on Asia's central banks. While China's gradual re-opening is not expected to provide much growth support to Asia until the second half of 2023, it may cause inflation in ASEAN economies such as Singapore, Vietnam, and Thailand to remain elevated for longer."

Ms Chua continued, "Based on investment and international trade trends in 2023, Citi forecasts a slowdown in the tech-led trade until the middle of 2023, followed by a U-shaped recovery in the second half of 2023. There are secular capex trends that are worth monitoring, namely in Indonesia and India. More investments will be made in India in the fiscal year 2023, with increased production capacity and a record level of foreign direct investment. Additionally, foreign investment is expected to flow into the Indonesian supply chain, particularly in the low-carbon metals and electric vehicle battery industries."

Nalin Chutchotitham, Citi Thailand economist, maintains 2023 Thai economic growth forecast at 4.3% after complete reopening. The tourism sector, in particular, will be a key growth driver, with an expected 23 million tourists in 2023, an increase from an expected 10.1 million in 2022. Private consumption is expected to continue growing as the labor income in the services sector recovers further. Despite the slowdown in the export sector, we continue to expect private investment to expand in 2023, supported by longer-term development in the government-promotedBio-Circular-Green industries, as well as the Eastern Economic Corridor project.

"Despite slower growth in the export sector, the current account is expected to revert from a deficit in 2022 to a surplus of 3.8% of GDP in 2023. This is expected to be led by higher tourism revenues, a decrease in freight service expenditure, and a narrower trade deficit due to lower commodity prices."

"However, the Thai economy may continue to face upside inflation risks from demand-pull pressures and unexpected increase in energy prices. In our base case, however, headline inflation is expected to return to an average of 2.5% in 2023. We also expect the Bank of Thailand to hike the policy rate to 2.25% by the third quarter of 2023. The gradual policy rate hike, combined with ample domestic liquidity, will help to mitigate the negative impact of higher borrowing costs on SMEs and households. Meanwhile, there remains some room for fiscal measures should the economic momentum weaken more than expected," Ms. Nalin concluded.

Citibank Thailand recently held an event dubbed "All-Star Analyst Day 2022" to provide corporate and institutional customers with information on economic and investment trends. Please contact Citibank Thailand or visit www.citibank.co.th for more information.